Google Targets Amazon Again, With Cloud Service

By AMIR EFRATI

Google Inc. moved to take on Amazon.com Inc. in the fast-growing market for what the industry calls cloud services, allowing companies to run their applications and store data on computers managed by the Internet giant.

The initiative, announced Thursday at Google's annual conference for software developers, comes one day after Google unveiled a $199 tablet to take on Amazon's identically priced Kindle Fire in the flashier consumer-electronics market.

With the new offering, called Google Compute Engine, Google is taking advantage of assets such as its highly touted data centers and custom-built servers that help it power Web applications that include the Google search engine. The company said the service was particularly suited to "computationally intensive" workloads, including scientific tasks requiring thousands of processors.

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Urs Hoelzle, senior vice president of technical Infrastructure, speaks at Google's developers' conference on Thursday.

The shift to services delivered over the Web—sometimes called cloud computing, or infrastructure as a service—has emerged as many businesses find it simpler and less expensive to let other companies manage the servers and software needed to run their businesses.

Amazon is considered the leader of the emerging sector, with a six-year lead on Google. The online retailer's Amazon Web Services division hosts applications for thousands of companies, including technology start-ups as well as more traditional companies like consumer-goods giant Unilever NV.

Amazon has stated publicly that the services unit, widely called AWS, could grow to be as big as its online retail business. It is on pace to generate around $2 billion annually, while that market is growing by 30% a year, estimated Ray Valdes, an Internet analyst at Gartner Inc.

Adam Selipsky, an AWS vice president, said Thursday that the company "was the pioneer in cloud computing" and has hundreds of thousands of clients and is "growing extremely rapidly due to our customers' belief that our platform has the breadth, security and performance they require."

Google has been ramping up its rivalry with Amazon in other areas, including handling Web searches for products, selling digital media such as books and videos to consumers, and devices more recently.

The Silicon Valley company's new initiative, led by Senior Vice President Urs Hölzle, is viewed internally as a defensive move against Amazon, while capitalizing on Google's data-center networks world-wide, according to people familiar with the initiative.

"This infrastructure comes with a scale and value that is unparalleled in the industry," Mr. Hölzle said on Thursday.

Mr. Hölzle is known for his role in pushing Google to embrace social networking, leading to another defensive move in developing Google+, a rival to Facebook Inc.

Kalani Keala, chief information officer of 1-800 Radiator & A/C Inc., a wholesale distributor of car radiators, said "Google could become the No. 1 player in this market because of the reputation of their infrastructure among technologists."

Two years ago Mr. Keala considered using Amazon's offering but he says the company couldn't guarantee that their systems would be fail-proof 99.99% of the time, which was necessary because "one hour of downtime could mean $200,000 in lost sales." In addition, he said, the company fell short on security guarantees because it couldn't "specify where our data would live and how separate it would be from other [companies'] data."

So Mr. Keala said his company built a "private cloud" with a network of "virtual" computer servers that could handle its needs for the next three years, at which time he expects to consider offerings such as Amazon's and Google's.

Amazon's Mr. Selipsky said the company had a "very strong security model" and houses federal-government and health-records data, and he said the company guarantees performance for 99.95% of the time, which he said was "higher than what most IT departments tell us they can achieve on their own."

Google Compute Engine emerges as the company is in the midst of several strategy shifts. On Wednesday, it bolstered its status as a force in hardware with the announcement of a new tablet, a media-streaming device and a preview of its futuristic-looking wearable computing device, called Glass. It also will be making devices through its Motorola division, which it recently acquired.

The company has already been active in online software. One example is Google Apps, the company's effort to sell email, word-processing and collaboration software to other companies. On Thursday Google said more than five million businesses were using Google Apps, though many of them are small companies that don't need to pay to use the suite of Web apps, which include Gmail and Google Docs.

But the new effort shows Google is serious about delivering more kinds of services to businesses.

Sébastien Gayat, a manager at lens manufacturer Essilor International SA in France, said he was attending Google's annual conference in order to see its new offerings for businesses. Essilor recently became a Google Apps customer, giving 20,000 employees access to the service, he said. Now his company is looking to offer business application to its customers, which are primarily opticians, and might need to rent server space. He was keen to learn about Google's prices compared to Amazon's.

"Google has proven it has the ability to manage tons and tons of data [for other businesses] at high speed," Mr. Gayat said.

Write to Amir Efrati at amir.efrati@wsj.com

A version of this article appeared June 29, 2012, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: Google Targets Amazon With Cloud Services.